(Recasts, adds fresh drilling data, updates prices tosettlement) By Eileen Houlihan NEW YORK, Sept 7 (Reuters) - U.S. natural gas futures slidover 3 percent on Friday, and ended the holiday-shortenedtrading week down more than 4 percent, as milder autumn weatherwas expected to curb any late-season demand for cooling orearly-season demand for heat. "The natural gas market has turned lower based on ashort-term cooling trend in temperatures that is undercuttingcash market values, pulling the futures lower," said CitiFutures energy analyst Tim Evans. Electronic natural gas trading was halted for about an hourearly Friday due to a technical glitch, but trading resumed at11 a.m. EDT (1500 GMT.) A U.S. Labor Department report showed jobs growth slowedsharply last month, setting the stage for the Federal Reserve totake new steps to stimulate the economy. Shut-in gas from Hurricane Isaac has also been returning toservice over the past few days, with few reports of damage fromthe storm. Isaac came ashore in southeastern Louisiana on Aug. 28,shutting more than 70 percent of offshore U.S. natural gasproduction, or more than 3.26 billion cubic feet per day, formost of last week. By Friday only 19.4 percent, or 847 million cubic feet, ofoffshore gas production, remained off line, a government reportshowed. Some traders said strong nuclear outages could help supportgas prices over the low-demand, autumn "shoulder" period, butmost expect futures to have a hard time breaking back above $3per million British thermal units, the level at which gas losesmuch of its appeal over coal for power generation. Front-month October natural gas futures on the New YorkMercantile Exchange slid 9.4 cents, or 3.39 percent, tosettle at $2.682 per mmBtu. The contract fell for a thirdstraight day. October futures slid 11.7 cents, or just over 4 percent, inthe four-day Labor Day holiday-shortened week. The nearby contract peaked at $3.277 in late July, itshighest mark since December. Other months ended lower as well, with the November contract losing 7.7 cents, or nearly 3 percent, to finish at$2.833, and winter months dropping about 6 cents each. In the cash market, weekend gas bound for the NYMEX deliverypoint Henry Hub in Louisiana lost 12 cents to $2.73.Late deals eased slightly to 2 cents over the front monthcontract, from deals done late Thursday at a 4-cent premium. Gas on the Transco pipeline at the New York citygate tumbled 29 cents on the milder weather forecasts to$2.80. The National Weather Service's six- to 10-day outlook issuedon Thursday called for mostly normal temperatures in consumingregions in the Northeast and Midwest and below-normal readingsin Florida and along the West Coast. Above-normal readings wereon tap for other parts of the West and in New England. On the nuclear front, outages totaled 6,900 megawatts, or 7percent of U.S. capacity, on Friday, down from 8,200 MW out onThursday and 8,500 MW out a year ago, but up from a five-yearoutage rate of 5,600 MW. A low-pressure system over the north-central Gulf of Mexicohad just a 20 percent chance for further development in the next48 hours, the National Hurricane Center said.

SMALL WEEKLY BUILD BUT STORAGE STILL BLOATED Shut-in offshore Gulf of Mexico production from Isaac curbedthis week's inventory build and should do the same to nextweek's injection, traders said. Thursday's storage report from the U.S. Energy Informationshowed domestic gas inventories rose last week by 28 billioncubic feet to 3.402 trillion cubic feet. The build was below Reuters poll estimates for a 36 bcfbuild and well below the year-ago gain of 62 bcf and thefive-year average increase for the week of 60 bcf. (Storage graphic: http://link.reuters.com/mup44s) It was the 18th time in 19 weeks that the weekly inventorybuild came in below the seasonal norm, having only exceeded thenorm last week. While a huge inventory surplus from the start of theinjection season has been sliced by more than half, storageremains 395 bcf, or 13 percent, above last year's levels and 329bcf, or nearly 11 percent, above the five-year average level. Stocks are at levels that still offer a huge cushion thatcan help offset any weather-related spikes in demand or furthersupply disruptions from storms. There are still concerns that the storage overhang coulddrive prices to new lows if stocks climb to levels that test thegovernment's 4.1 tcf estimate of capacity. Early injection estimates for next week's EIA storage reportrange from 22 to 65 bcf versus a year-earlier gain of 80 bcf anda five-year average build of 72 bcf for that week.

DRILLING RIGS SINK TO 13-YEAR LOW Baker Hughes gas drilling rig data on Friday showed thenumber of rigs drilling for natural gas in the United Statesslid by 21 this week to a 13-year low of 452. (Graphic: http://r.reuters.com/dyb62s) The count was down for the 14th time in 16 weeks. The nearlysteady decline in gas-directed drilling over the last 10 monthshas fed expectations that producers were getting serious aboutstemming the flood of record supplies. But so far there islittle evidence that gas output is slowing.

(Reporting by Eileen Houlihan; Editing by John Wallace, SofinaMirza-Reid, David Gregorio and Bob Burgdorfer)